Bank FD Vs Post Office Saving Scheme : Which Is Better

When it comes to investments, you always need to do a careful planning and research before settling with an option. This is because, the decision you make can affect the several aspects of your investment like flexibility of operation, tenure and interest rate besides many others. Here we compare between the FDs offered by banks and the Post Office Savings Scheme to decide which among them is the better option for investors looking from different angles.

Bank FDs and Post Office Savings

Bank FDs are the conventional fixed deposit investment instruments offered by different banks. Any amount of money without any upper limit can be invested in FD for a period ranging from 12 months to 60 months. The rates of interest for FDs vary between banks and for different categories of investors like regular investors and senior citizens.

Post Office Savings scheme is operated by Post Office which is also popularly called as small savings scheme. They are known to offer far better interest rates and returns than bank deposits. Here is a comparison of the different features of FD and Post Office Saving Scheme.

Interest rate of Bank FD and Post Office

To compare the interest rate between FD and Post Office, let us take the case of SBI for example. SBI is the largest lender in the country. While SBI offers only 5.75% interest on your investment in FDs, a five year term post office term deposit can give you 7.4%. The interest rate of PPF is 7.8%. NSC offers 7.6% interest on deposits and the interest rates for deposits in Sukanya Samriddhi and KVP are 8.1 percent and 7.3 percent respectively.

Tax efficiency

When compared to the banks FDs, some schemes offered by the post office are seen to be more tax efficient. For instance, what is earned from PPF is completely tax exempted. On the other hand, all that is earned from FD is taxable. Under Section 80C, it is possible to get tax savings for bank FDs. Some select post office savings schemes like PPF, National Savings Certificate, and Sukanya Samriddhi can give the investors similar tax benefits. Since post office savings schemes combine in them a higher interest rate as well as some attractive tax benefits, they weigh more than the bank FDs.

Advantages for senior citizens in FD and Post Office

Majority of the bank deposits do not give any encouraging benefits to senior citizens. Whereas, the Senior Citizens Saving Scheme offers 8.3% per annum. The senior citizens looking for monthly income will find the monthly income scheme much better at Post Offices s it would offer an interest rate of 7.3% per annum. The monthly interest rates on the bank deposits are considerably lower and hence are not that beneficial when compared with the post office savings schemes.

Service quality in Bank FD and Post Office

In this one aspect, the banks significantly outweigh the post offices. When it comes to customer service, banks work with the latest and advanced technology today. The experience at the post office can be time consuming and tedious involving a lot of paper work. However, considering the significant gains that you have while investing in the post office savings schemes, you can overlook this aspect and settle with these better investment instruments to gain more from your hard earned money.
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